USD/JPY Hits New 37.5-Year High for Consecutive Days, Driven by Japan-U.S. Interest Rate Differential and Trump

USD/JPY has risen to the high end of the 161 yen range, setting new 37.5-year highs for consecutive days. The main driving force behind this surge is the Japan-U.S. interest rate differential.

The political instability in France calmed at the beginning of the week, causing market participants to focus on carry trades based on the interest rate differential once the negative factors subsided. EUR/JPY is also trading in the 173 yen range, marking the highest level since the euro was introduced.

Additionally, the TV debate between Biden and Trump last week saw Trump emerging as the dominant figure, further fueling dollar buying and accelerating the rise of USD/JPY.

In this scenario, concerns about yen-buying intervention by the government and the Bank of Japan (BoJ) have not intensified as much as before. The market is experiencing a relatively gradual depreciation of the yen, making it unclear whether the intervention level would be at 163 yen or 165 yen. However, with Finance Minister Kanda in charge until the end of July, there is still a possibility of interventions timed to market trends and dynamics.

Regarding related events, the ECB Forum 2024 "Monetary Policy in a Transforming World" continues until tomorrow. Today's attendees include ECB Vice President De Guindos, ECB Board Member Elderson, ECB Board Member Schnabel, ECB President Lagarde, and Fed Chair Powell. Additionally, Chicago Fed President Goolsbee will appear on Bloomberg TV.

If Trump remains dominant, it is expected that cryptocurrencies would also react. However, there are concerns about downward pressure on BTC prices due to Mt.Gox's consideration of repaying 140,000 BTC in July. Although this large repayment could potentially lower BTC prices, there are differing opinions on whether such a large volume will be sold.

Furthermore, even if BTC is sold, the cash payments and reinvestments to FTX creditors in August are expected to provide a tailwind, pushing BTC prices up. Considering this, it is anticipated that fewer BTC holders will rush to sell.

Today, attention will be on the flow of USD around the release of the U.S. May JOLTS Job Openings. Future movements will be monitored to determine entry points.